education and mentoring for your retirement




Know Your Investor Rights

Our securities laws provide protection for investors who have lost money due to improper conduct by their stockbrokers or other securities professionals.  Many persons place trust in the investment professionals who advise them about their investments to “make the right decision” about where they should put their investment dollars.  This can be especially true of retired persons, and those approaching retirement age.

Sometimes that investment advice results in significant losses, with the resulting devastating effect on someone’s retirement.  Expecting to have adequate funds for retirement and then losing a significant part of those funds as a result of bad investment advice can be devastating.

What should a person in that situation do?  If the law or the rules governing brokers and other securities advisors have been broken, there is a way for the investor to seek recovery of the lost money - and sometimes recover their attorneys fees, costs and punitive damages.

The National Association of Securities Dealers (NASD) governs and regulates the conduct of stockbrokers and their firms.  The NASD provides an arbitration process, through which most investor claims are processed.  The arbitration process (in contrast to court litigation) is fast, inexpensive, and can result in the investor recovering his or her losses.  Recent NASD arbitration statistics show that customers won awards in 50% of the arbitration cases filed at the NASD over the last six years.  In 2006, 60% of arbitration cases were settled, according to the NASD.

How do you know if you have a legitimate claim to seek damages for losses in your account?  Investment professionals are bound to follow both the law (the federal securities acts, and state securities laws) and the rules of the NASD.  Those laws and rules provide for recovery of damages when the broker/investment professional has failed to follow the applicable law or rules, causing losses from one or more of the following violations:

·                      Unsuitable recommendations

·                      Breach of fiduciary duty

·                      Failure to supervise the broker by the brokerage firm

·                      Breach of contract

·                      Misrepresentation

·                      Negligence

·                      Churning

·                      Unauthorized trading

·                      High pressure sales tactics

·                      Fraud

The arbitration process is complex, and most people who think they have a valid claim seek the advice of an attorney experienced in securities cases.  While it is not required to have an attorney to file a claim, an experienced attorney can provide an evaluation of your claim before it is filed and then assist you with the various legal and procedural matters that are of vital importance in fashioning a winning case.  Most attorneys will provide a free initial consultation and will consider taking your case on a contingent fee basis (no recovery, no attorney fee, although you may be required to pay costs of the case; your attorney will discuss this with you).

Many investors have filed arbitration claims to seek recovery of their investment losses.  In the last three years (2004 - 2006) over 18,000 arbitration claims have been filed at the NASD. Any investor who thinks they have suffered losses as a result of improper conduct by their broker should consider having their case evaluated to determine whether they should file an arbitration claim for their losses.                                   

[Jeffrey Scott, author of Know Your Investor Rights, is a Denver, CO attorney specializing in securities arbitration and litigation]